How do we make our supply chains sustainable

 If New Zealand is to succeed in its transition to a sustainable low-emissions economy, the collaboration of businesses with their supply chain partners is a must. Although there is variation between sectors, on average emissions from a business’s supply chain are 5.5 times greater than those from its own operations.

Emissions concentrate upstream, in the sourcing or use of raw materials, production and packing of consumer goods. Comparatively, downstream emissions associated with distribution and sales, are negligible. This typical emissions profile is well-illustrated by the meat and dairy sector – New
Zealand’s largest contributor to gross emissions at 48%.  For example, Fonterra reports that 89% of its emissions are generated on-farm; just 1% is attributed to domestic and international transportation.

Beyond mitigation, business is increasingly aware that climate change poses material risks; changing weather patterns are already impacting farmers, stricter regulations will require serious action on mitigation, and more consumers are ‘climate-conscious’. For a business’s climate response to be robust, vulnerabilities in its supply chain to these risks must be addressed, alongside components where emissions concentrate.

In designing climate response strategies, experience shows that delegating this task internally alone is ineffective. Handing supply chain partners pre-made ‘solutions’ fails to evoke the type of commitment required to translate paper-based strategies into real-world action.

This being so, business need to focus on generating commitment throughout their supply chains – which begs the question, how?

According to MIT Professor Peter Senge, an expert on sustainability transitions, the answer is collaboration. First, the involvement of supply chain partners at the very initial stages of understanding the problem ensures that they too ‘buy-in’ to the necessity for change. Second, Senge’s work, which has been applied by world-leading companies from Coca Cola to Shell, demonstrates that getting ‘the whole system in the room’ to envisage an ideal future state, or vision, is key to success. Importantly, an organisation’s whole system is broader than supply chain partners. Coca Cola, for instance, recently launched an initiative in collaboration with industry, NGOs and government partners to implement a circular economy approach in Ho Chi Minh City.

Tava Olsen, Director of the New Zealand Centre for Supply Chain Management has noted that, in the past, New Zealand businesses are ‘not very good at collaboration’. Given the scale of the climate crisis, and in particular the risks it poses to our primary sector, this state of affairs has been shifting.  Beef + Lamb, for instance, has recently established a collaborative Catchment Communities programme to help farming communities collectively tackle emissions. 

Going a step further to fully capture the benefits of collaboration, New Zealand businesses would be wise to heed the advice of those that have applied Senge’s approach. When genuine commitment from supply chain partners is needed, hierarchal authority becomes problematic; “The name of the game”, according to ex-CEO of Shell, Philip Carrol, “is giving up power.”

Sharne Usherwood is the Director of KPMG and Lucie Greenwood is a Senior Adviser in sustainable value at KPMG